SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
[X] Current Report Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
June 18, 1998
(Date of Report)
Commission file number: 0-28354
Great Lakes REIT, Inc.
(Exact name of Registrant as specified in its Charter)
Maryland 36-3844714
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation organization)
823 Commerce Drive, Suite 300, Oak Brook, IL
60523 (Address of principal executive offices)
(Zip Code)
(630) 368 - 2900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITIONS
As previously reported in a Current Report on Form 8-K filed April 20, 1998, on
April 15, 1998, Great Lakes REIT, Inc. through Great Lakes REIT, L.P.
(collectively the "Company") acquired the Milwaukee Center Office Tower, a
twenty-eight story, Class-A office building located at 111 East Kilbourn Avenue,
Milwaukee, Wisconsin.
In addition, on January 6, 1998, the Company acquired the Star Bank Center, a
thirteen-story, Class A office building located at 175 South Third St.,
Columbus, Ohio.
TERMS OF PURCHASE
Milwaukee Center Office Tower was purchased from an unaffiliated third party for
approximately $46,700,000. Star Bank Center was purchased from an unaffiliated
third party for approximately $22,420,000. Funds for the purchases came from a
borrowing under the Company's unsecured line of credit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The required financial statements for the Star Bank Center office building are
attached as Exhibit A.
The required financial statements for Milwaukee Center Office Tower are attached
as Exhibit B.
The required proforma financial statements are attached as Exhibit C.
No information is required under Items 1,3,4, and 6, and these items have
therefore been omitted.
By: /s/ Richard L. Rasley
Richard L. Rasley, Secretary
<PAGE>
Exhibit A
Statement of Revenue and Certain Expenses
Star Bank Office Building
Year Ended December 31, 1997
with Report of Independent Auditors
<PAGE>
Report of Independent Auditors
The Board of Directors
Great Lakes REIT, Inc.
We have audited the accompanying Statement of Revenue and Certain Expenses of
Star Bank Office Building (the Property) for the year ended December 31, 1997.
The Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement of Revenue and Certain Expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement of Revenue and Certain
Expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the Statement of Revenue and Certain Expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Great
Lakes REIT, Inc. as described in Note 2, and is not intended to be a complete
presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses
described in Note 2 of the Property for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
April 9, 1998
<PAGE>
<TABLE>
<CAPTION>
Star Bank Office Building
Statement of Revenue and Certain Expenses
Year Ended December 31, 1997
<S> <C>
Revenue
Base rents $2,062,129
Tenant reimbursements 868,711
Other income 16,327
--------------------
Total revenue 2,947,167
--------------------
Expenses
Real estate taxes 30,649
General operating 233,251
Utilities 289,269
Cleaning and landscaping 267,372
Repairs and maintenance 449,796
Management fee 92,000
--------------------
Total expenses 1,362,337
--------------------
Revenue in excess of certain expenses $1,584,830
====================
</TABLE>
See accompanying notes.
<PAGE>
Star Bank Office Building
Notes to Statement of Revenue and Certain Expenses
1. Business
The accompanying Statement of Revenue and Certain Expenses relates to the
operations of Star Bank Office Building (the Property), a thirteen-story office
building located in Columbus, Ohio. The Property was acquired on January 6,
1998, subject to an underlying ground lease, by a partnership controlled by
Great Lakes REIT, Inc. (Great Lakes).
At December 31, 1997, the Property was 76% leased with thirty-one tenants. Two
tenants accounted for approximately 28% of base rents at December 31, 1997.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Great
Lakes. The statement is not representative of the actual operations of the
Property for the period presented nor indicative of future operations as certain
expenses, primarily depreciation and amortization, which may not be comparable
to the expenses expected to be incurred by Great Lakes in future operations of
the Property, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Statement of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the Statement of
Revenue and Certain Expenses. Actual results could differ from those estimates.
3. Rentals
The Property has entered into tenant leases that provide for tenants to share in
the operating expenses and real estate taxes in relation to their pro rata
basis, as defined.
4. Management Agreement
During the year ended December 31, 1997, the Property was managed by a
third-party management company. The management agreement provided for 3.25% of
gross monthly receipts, not to exceed $92,000 per year.
<PAGE>
Exhibit B
Combined Statements of Revenue and Certain Expenses
Milwaukee Portfolio
Year Ended December 31, 1997
with Report of Independent Auditors
<PAGE>
Report of Independent Auditors
The Board of Directors
Great Lakes REIT, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Milwaukee Center Office Tower and Milwaukee Center Central Plant
(the Properties) for the year ended December 31, 1997. This Combined Statement
of Revenue and Certain Expenses is the responsibility of the Properties'
management. Our responsibility is to express an opinion on the Combined
Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Combined Statement of Revenue and Certain Expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Combined Statement of
Revenue and Certain Expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the Combined Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission, for inclusion in the Current Report on Form 8-K/A of
Great Lakes REIT, Inc. as described in Note 2, and is not intended to be a
complete presentation of the Properties' combined revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 2 of the Properties for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
May 21, 1998
<PAGE>
<TABLE>
Milwaukee Portfolio
Combined Statements of Revenue and Certain Expenses
<CAPTION>
January 1, 1998
Year Ended through
December 31, 1997 April 15, 1998
(Unaudited)
-------------------- ---------------------
<S> <C> <C>
Revenue
Base rents $6,917,309 $1,936,604
Tenant reimbursements 720,962 345,368
Other income 42,479 23,702
--------------------
---------------------
Total revenue 7,680,750 2,305,674
-------------------- ---------------------
Expenses
Real estate taxes 872,341 323,411
General operating 665,609 204,089
Utilities 595,726 200,823
Cleaning and landscaping 378,964 107,037
Repairs and maintenance 684,225 156,870
Management fee 155,250 46,205
-------------------- ---------------------
Total expenses 3,352,115 1,038,435
-------------------- ---------------------
Revenue in excess of certain expenses $4,328,635 $1,267,239
==================== =====================
</TABLE>
See accompanying notes.
<PAGE>
Milwaukee Portfolio
Notes to Combined Statements of Revenue and Certain Expenses
1. Business
The accompanying Combined Statements of Revenue and Certain Expenses relate to
the operations of Milwaukee Center Office Tower, a twenty-nine story office
building (office tower), and Milwaukee Center Central Plant, a 1,000,000 square
foot power transfer plant (central plant), (together, the Properties) located in
Milwaukee, Wisconsin. The Properties were acquired from the same owner on April
15, 1998 by a partnership controlled by Great Lakes REIT, Inc. (Great Lakes).
As of April 15, 1998 and December 31, 1997, the office tower was 83% and 85%
occupied with twenty-eight and thirty tenants, respectively. At April 15, 1998
and December 31, 1997, two tenants and three tenants accounted for approximately
67% and 75% of base rents, respectively. The central plant purchases electricity
from generating plants and sells the electricity primarily to the office tower.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Combined Statements of Revenue and Certain Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, for inclusion in the Current Report on Form
8-K/A of Great Lakes. The combined statements are not representative of the
actual operations of the Properties for the periods presented nor indicative of
future operations as certain expenses, primarily depreciation and amortization,
which may not be comparable to the expenses expected to be incurred by Great
Lakes in future operations of the Properties, have been excluded.
Revenue and Expense Recognition
Revenue of the office tower is recognized on a straight-line basis over the
terms of the related leases. Expenses are recognized in the period in which they
are incurred.
Use of Estimates
The preparation of the Combined Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the Combined
Statements of Revenue and Certain Expenses. Actual results could differ from
those estimates.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Principles of Combination
The Combined Statements of Revenue and Certain Expenses include the accounts of
the office tower and central plant. Significant intercompany accounts and
transactions have been eliminated.
Unaudited Interim Statement
In the opinion of management, the interim combined financial statement reflects
all adjustments necessary for fair presentation of the results of the interim
period. All adjustments are of a normal, recurring nature.
3. Rentals
The office tower has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.
4. Management Agreement
During the periods from January 1, 1998 to April 15, 1998 and from January 1,
1997 to December 31, 1997, the office tower was managed by a third-party
management company. The management agreement provided for monthly payments of
$12,938.
<PAGE>
Exhibit C
<TABLE>
Great Lakes REIT, Inc.
Consolidated Pro Forma Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
<CAPTION>
1997 1997 Pro Forma
Historical (1) Acquisitions (2) Adjustments
<S> <C> <C> <C>
Revenues
Rental $36,231,301 12,671,161
Reimbursements 10,688,046 2,567,376
Interest and other 744,514 112,933
---------------------------------------------------------------
Total revenues 47,663,861 15,351,470
---------------------------------------------------------------
Expenses
Real estate taxes 7,702,203 2,199,403
Other property operating 11,969,092 4,822,634
General and administrative 3,379,121
Interest 4,308,173 5,826,453 (4) (3,622,836) (5)
Depreciation and amortization 8,199,846 1,608,845 (3)
---------------------------------------------------------------
Total expenses 35,558,435 14,457,336 (3,622,836)
---------------------------------------------------------------
Net income $12,105,426 894,134 3,622,836
===============================================================
Earnings per common share - basic $0.92
=================
Weighted average common shares outstanding - basic 13,140,124
=================
Diluted earnings per common share $0.91
=================
Weighted average common shares outstanding - diluted 13,304,540
=================
</TABLE>
<TABLE>
Great Lakes REIT, Inc.
Consolidated Pro Forma Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
<CAPTION>
Star Bank &
Pro Forma Milwaukee 1997
Prior to these Center Company
Acquisitions Acquisitions Pro Forma
<S> <C> <C> <C>
Revenues
Rental 48,902,462 8,979,438 $57,881,900
Reimbursements 13,255,422 1,589,673 14,845,095
Interest and other 857,447 58,806 916,253
---------------------------------------------------------------
Total revenues 63,015,331 10,627,917 73,643,248
---------------------------------------------------------------
Expenses
Real estate taxes 9,901,606 902,990 10,804,596
Other property operating 16,791,726 3,804,417 20,596,143
General and administrative 3,379,121 3,379,121
Interest 6,511,790 4,785,000 (4) 11,296,790
Depreciation and amortization 9,808,691 1,662,524 (3) 11,471,215
---------------------------------------------------------------
Total expenses 46,392,935 11,154,931 57,547,866
---------------------------------------------------------------
Net income 16,622,396 (527,014) $16,095,382
===============================================================
Earnings per common share - basic $1.02
==================
Weighted average common shares outstanding - basic 15,841,027
==================
Diluted earnings per common share $1.01
==================
Weighted average common shares outstanding - diluted 16,005,443
==================
</TABLE>
See accompanying notes to pro forma consolidated statement of income
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of properties
acquired subsequent to December 31, 1996 as if the properties were acquired
by the Company at the beginning of 1997.
3. Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1997 to the acquisition date based on the purchase price
paid by the Company for the properties.
Interest expense ($4,785,000) for Star Bank and Milwaukee Center is computed
on the amount borrowed ($66,000,000) on the Company's unsecured line of
credit to acquire the properties for the period January 1, 1997 to December
31, 1997 at 7.25% per annum, the average interest rate during the period.
4. Interest expense ($5,826,453) for 1997 acquisitions acquired in 1997 is
computed on the amount borrowed ($68,500,000) on the Company's line of
credit to acquire the properties for the period January 1, 1997 to December
31, 1997 at 7.25% per annum, the average interest rate during the period.
Also included in interest expense is the amount calculated on the mortgage
loan ($12,125,000) for Tri-Atria for the period January 1, 1997 to December
31, 1997 at 7.08% per annum, the fixed interest rate for the note.
Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1997 to December 31, 1997 based on the purchase price paid
by the Company for Star Bank and Milwaukee Center.
5. Interest expense has been reduced by $3,622,836 which represents interest
paid on debt retired with the proceeds of the Company's initial public
offering in May 1997 as if the offering occurred on January 1, 1997.
The pro forma interest expense adjustment is calculated as follows:
Actual bank loan interest incurred by the
Company in 1997 $2,798,119
Actual interest incurred by the Company in
1997 on long-term debt retired 824,717
-----------------
Pro forma interest expense adjustment $3,622,836
=================
<PAGE>
<TABLE>
Great Lakes REIT, Inc.
Consolidated Pro Forma Statement of Income
For the Three Months Ended March 31, 1998
(Unaudited)
<CAPTION>
Star Bank &
Milwaukee 3/31/98
3/31/98 Center Company
As Reported (1) Acquisitions (2) Pro Forma
<S> <C> <C> <C>
Revenues
Rental $12,863,492 1,936,604 $14,800,096
Reimbursements 3,765,137 298,184 4,063,321
Interest and other 174,415 10,903 185,318
----------------- ----------------- ------------------
Total revenues 16,803,044 2,245,691 19,048,735
----------------- ----------------- ------------------
Expenses
Real estate taxes 2,728,292 312,172 3,040,464
Other property operating 4,235,563 754,555 4,990,118
General and administrative 1,097,120 1,097,120
Interest 2,035,139 430,200 (4) 2,465,339
Depreciation and amortization 2,738,578 142,240 (3) 2,880,818
----------------- ----------------------------------------
Total expenses 12,834,692 1,639,167 14,473,859
----------------- ----------------- ------------------
Net income $3,968,352 606,524 $4,574,876
================= ================= ==================
Earnings per common share - basic $0.25 $0.29
================= ==================
Weighted average common shares outstanding - basic 15,860,320 15,920,691
================= ==================
Diluted earnings per common share $0.25 $0.28
================= ==================
Weighted average common shares outstanding - diluted 16,145,417 16,205,788
================= ==================
</TABLE>
See accompanying notes to pro forma consolidated statement of income
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME THREE MONTHS ENDED MARCH
31, 1998
(UNAUDITED)
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of Star Bank and
Milwaukee Center for the period January 1, 1998 to January 7, 1998 and
January 1, 1998 to April 15, 1998, respectively.
3. Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1998 to the acquisition date based on the purchase price
paid by the Company for the properties.
4. Interest expense ($430,200) is computed on the amount borrowed ($66,000,000)
on the Company's unsecured line of credit to acquire the properties for the
period January 1, 1998 to January 7, 1998 (Star Bank) and January 1, 1998 to
April 15, 1998 (Milwaukee Center) at 7.2% per annum, the average interest
rate during the period.
